From: Rick Kranz
To: General Motors President Rick Wagoner
Congratulations on your linkup with the Fiat Group. I think you did a great job of keeping the negotiations secret. I'll bet Juergen Schrempp is chewing his fingernails with frustration.
But I do have some reservations about the deal's impact on North America. Granted, you have no immediate plans to reintroduce the Fiat brand to the United States. My advice would be to keep any reference to the Fiat name off any engine or GM-brand vehicle sold in North America.
At first glance, Alfa Romeo might have some promise in the United States. A flashy red Alfa has plenty of sex appeal. And I know that some of your advisers want to stock these cars in Saab showrooms. After all, those quirky Saab customers want to stand out in a crowd, right?
But like those earlier Fiat-branded products, Alfa Romeo has a shaky reputation for quality in the United States. An Alfa Romeo was great to be seen with, but during those private moments (usually in a repair shop), it was expensive, demanding and unreliable.
Alfa Romeo was never a good seller in the States. During Alfa's last full year in 1994, a mere 565 cars were sold in the United States. Even in its best year in 1986, only 8,201 cars were sold. How many cars can we expect to sell next time, even with GM's extensive dealer network?
Alfa is no Jaguar
Some might say that GM could reinvent the Alfa Romeo brand, in much the same fashion that Ford Motor Co. did with Jaguar. But Ford had two big advantages. First, Jaguar never abandoned the U.S. market, so it did not face the burden of reintroducing the brand. Second, even with its quality flaws, Jaguar's beautifully styled cars appealed to a wider range of potential buyers than Alfa Romeo ever did.
I think GM would have to spend a small fortune to reintroduce the Alfa Romeo brand and convince potential buyers that Alfa is here to stay. And which dealers will sell it?
I talked to Jim Hall about this. He's the vice president of industry analysis at AutoPacific Inc. in Southfield, Michigan. He raised an interesting point: 'If you were to bring Alfas over to this country, where would you merchandise them? If you are going to use the GM franchise, there's no logical fit anywhere in my mind.'
Although Saab would be the most likely franchise, Hall wasn't too enthused about the likely impact on its brand image. 'Saab as a stand-alone (franchise) is just starting to get its identity,' he told me. 'You dilute it by doubling it up.'
A stand-alone franchise?
Hall said it would be more logical to set up Alfa as a stand-alone franchise. You could offer it as a 'dual' franchise to the best dealers in each region. 'If you end up doing business with a Porsche dealer, that to me would be just as logical as trying to force it on one of your `house' brands.'
Let's face it: Fiat never was a popular brand in the United States. Even in its best year in 1976, Fiat sold a mere 102,000 cars. After that, it was a quick downhill slide. In 1982 - Fiat's last year in the United States - U.S. sales plummeted to 14,000 cars.
The final nail in the brand's coffin was that battle between the U.S. government and Fiat. Remember? The U.S. went to court to force Fiat to fix the damage caused by excessive rust and corrosion on the underbodies of Fiat's 124 and 850 models. U.S. regulators said the rust was so serious that it posed a safety hazard to the models' structural and steering components.
I still have a clip from the Jan. 17, 1983 Automotive News: 'The rust problems were so serious, and Fiat delayed correction for so long, that the episode is thought to have very adversely affected the company's image, and subsequently, its sales.'
This is hardly the reputation to brag about if you want to march back into the States with the next Fiat Spider, new powertrains and rebadged vehicles. Granted, Fiat's quality has increased by leaps and bounds since then, but the vast majority of Americans don't know that.
Well, Rick, you have a lot of work to do! Best regards.